Category: Financial Planning

Benefits of Financial Planning

Benefits of Financial Planning

The term Financial Planning gained traction in the past few years and by now most, if not everyone, would be familiar with it. However, people still associate it only with investments and wealth management. For most of the people personal finance starts and ends with making investments that fetch higher returns with low risk. A sizeable majority associate better returns with investments made in stock markets. While that may be correct, not many are aware about the pitfalls associated with investing in stock markets. Most importantly, people tend to ignore many other aspects of Personal Finance like Insurance, Asset Allocation, Goal based planning etc. that form the premise of scientific investing and can have lasting effects on their life.

One needs to understand that Financial Planning is NOT only about investments. And it is definitely not just another fancy word for investing in stock markets. Financial Planning is a holistic approach to your Personal Finances which takes into consideration your Cash flows, Assets and Liabilities, Risk appetite, investment needs to meet your Financial Goals, Insurance needs after considering all existing assets and resources one owns.

Why should I avail Financial Planning services as against regular investment advice?

Holistic Approach

Financial Planning is essentially bringing together various aspects of your financial life.  Investors can reap huge benefits by looking at their financial lives holistically through a mixture of comprehensive planning and investment advice that is driven by goals. Handling one’s finances, professionally termed as financial management, doesn’t come easily to everyone and it is here that a professional help can be sought. From budgeting, planning large purchases for the family to planning for unexpected events and estate planning, financial planning works well at all stages of life. This methodical approach to your personal finances is a balanced way that fits in smaller pieces together and helps you look at the bigger picture.

Changes in Economic environment

After the liberalization of Indian economy in 1991, there have been sweeping changes in the financial landscape of our country. More choices of investment avenues are available to investors today than were available pre-liberalization. With the plethora of products and services, it is an uphill task to choose the right Mutual Fund scheme or the right and Insurance policy from more than 1000 odd schemes and policies available in the market. While most of this augurs well for the investors, this also makes it imperative for them to seek out a Financial Planner who can educate them and help them to choose right products for their financial needs.

Changes in social environment 

This is one thing that we keep hearing endlessly; however, we fail to appreciate its profound effects on our Personal Finances. It’s a well acknowledged fact that traditional Indian families, that only until about 20-30 years back were very conservative in terms of their lifestyle, are rapidly on decline.

In India the baby boomers, namely people born post World War II until mid-sixties, had very less exposure and variety in terms of food, clothing and luxurious life. This was the domain of a select affluent class. People born in those times will recall the frugal lives their parents lead. Families were large and incomes were low. The only way one saved money was by keeping a strict check on their expenses. Accumulating wealth in such conditions was difficult and most of the meagre savings were invested in Government schemes which were the only investment avenues back then.

The Gen X, people born from mid-sixties to mid-seventies saw little improvements in life-style. Cinema, theatre and music assumed prominence as means of entertainment. Apart from these, though, the life-style was pre-dominantly frugal. Incomes were still low and investments were largely restricted to EPF, PPF and FDs. People still lived within their means and could afford an occasional purchase of electronic equipment or a piece of jewellery in the name of luxury.

The Gen Y or the millennials, born from mid-seventies to mid-nineties, witnessed lot of changes in their growing up years. They saw their families adapting to technology like grinders and washing machines, for their day to day use. The traditional ways of life started to change slowly but surely. In their late teens, this generation saw computers enter their homes. This period coincided with the IT boom in the 90s. India had opened its economy in 1991 and as MNCs set up their offices in our country, preferences of people started changing from stable Government jobs to private jobs that offered higher salaries and exposure.

Around this time and into the new century, the millennials had started to visit developed countries like the US and UK for education and work and were exposed to a better quality of life in these countries. Living within one’s means slowly started giving way to luxurious lifestyle with better choices available in the market. Meanwhile, the size of family had gradually shrunk, parents were no longer solely dependent on their children and people had lesser financial commitments towards their family. The millennials enjoyed higher incomes and lesser responsibilities. However, with rising incomes and GDP came the evil of rising inflation.

As a result of all these socio-economic changes, we have a generation of people who have high disposable incomes and aspirations for a luxurious life, but are clueless about managing their finances. In fact, it is normal for planners to hear things like “meeting month-on–month expenses with my present income is a tough task, how do I generate additional savings?” All of this suggests an impending need for millennials to actively plan their financial life and look beyond traditional ways of managing their finances. A financial planner can put things in perspective and offer valuable advice in this regard.

A mirror to your present financial and investment practices

While people haven’t still wisened up to the benefits of a professional advice, they are aware of the changing scenario and feel the need to make investments for their long-term commitments. Such investments are not made with adequate research and people end up accumulating financial products that do not fit their need or worse have high costs but give low returns.

In fact, majority of savings in Indian households lie in Fixed Deposits and PPF accounts which are low interest earning and sometimes don’t even cover inflation. Hence real returns are negative.

Benefits of Financial Planning

Here again, a financial planner can not only help you analyze your existing investments, they can suggest better investment avenues to match your requirements.

Real Rate of return

Lack of time or expertise in all areas of finance or unsure where to start

Lack of time

For most people their finances are lowest in priority amongst the list of to-do things. With the fast-paced lives we all lead, most of us either lack the time and expertise to do such a daunting job or simply procrastinate about it.  Those who still find time on a regular basis may lack the expertise to analyze various products and choose the one that is most suitable for them. There are also people who realize the need to start investing early on in their working life but have no clear idea about where to make the start. All these scenarios can be addressed by seeking the help of a professional who is trained in all aspects of personal finance and hold your hands as you start your journey.

Expert Advice

A Financial Planner has to undergo rigorous training and examinations to obtain the certification. They are certified in important aspects related to personal finance like investments, insurance, taxation, Estate Planning and know how to plan finances taking all these things into consideration. Further, the certification requires candidates to have practical experience of minimum three years to practice independently and keep abreast of latest developments on a continuous basis.


As Independent Financial Planners, we follow the six basic steps in the process of Financial Planning as underlined below:

Financial Planning Process

  1. Bulding a relationship with Prospect : By outlining objectives during meeting with advisors ensuring one’s comfortability we can proceed to next level of financial planning
  2. Collecting data and establishing financial goal and objectives to generate financial plan: At this level we collect the data from you by trying to understand about what your requirement based on the objectives discussed.

  3. Analyzing one’s need, requirement and objectives based on their financial status: Based on the information gathered by you we (advisors) analyze monetary elements to make up your life such as savings, investments, risk coverage, retirement plan, tax planning and inheritance.

  4. Structuring and presenting a prepared financial plan: After developing a bespoke financial plan which gives you a picture, where you are today and where you want to be in future. Based on the objectives set by you we prepare “Gap Analysis”

  5. Implementation of such structured plan: This is an important and crucial stage wherein we implement the plan presented to you after Letter of engagement is signed and confirmation mail sent by you.

  6. Monitoring the progress of financial Goals established: This is the time where we revisit our relationship by monitoring and evaluating the bespoke plan. Plan prepared for you may get outdated due to change in your personal or economic circumstances. Any modifications or adjustments will be taken at this step.

Benefits of Financial Planning services

Provides a direction and meaning to your financial decisions.

One of the tangible benefits of Financial Planning is that it provides a direction to your financial decisions. It allows you to understand how each financial decision you make affects other areas of your finances. For example, buying a particular investment product might help you pay off your mortgage faster or it might delay your retirement significantly. By viewing each financial decision as part of the whole, you can consider its short and long-term effects on your life goals.

A professional guide to steer you through

With a professional planner by your side you have a lifetime guide in your financial journey.

A professional is abreast of changes happening in the financial landscape of the country and with your finances in his/her safe hands there’s no need to worry about changes happening in tax and investment laws and their effect on your financial decisions.

Adapt easily to life changes 

Ever since our lives have become fast paced, there’s much anxiety about what the future will hold or whether we will be able to afford the same life-style in the event of unforeseen circumstances arising. With a Financial Plan in place, important aspects of your finances are taken care of, alternative course of action thought beforehand, thereby making us better equipped to adapt to any changes in life.

Peace of mind

Lastly, one of the intangible benefits of proper planning of finances is that it ensures peace of mind. One is assured in his mind that he has taken the necessary steps to mitigate any risks to themselves or their property, which might arise in the future.

Why Choose a CFPCM:

Where one may require some expert help and follow up with their financial plan; there comes the role of CFPCM. These professionals have a fiduciary responsibility to act in the best interest of client. To earn the CFPCM certification individual has to undergo comprehensive study of various topics in personal finance. Individuals need to pass comprehensive CFPCM Examination which covers such modules like Retirement & Estate Planning, Tax Planning, Investment Planning and Insurance Planning through which one acquires necessary knowledge to become a Financial Planner. Experience is another important criterion to use the CFPCM trademark. Considering financial planning as one of the nascent industry in India, FPSB confers this certification to the candidates who have acquired adequate experience in the financial services sector and also satisfy competency requirements regarding Education, Examination and Experience by signing the Ethics Declaration. There is also continuing education requirement that needs to be validated year on year to maintain the certification.

Compliance of all these requirements ensures that the CFP CM certified professional is not just qualified but keeps himself updated of all the latest developments in the financial landscape.

When it comes to the Ethics, CFP CM professionals are obliged to follow the CFP Board code of ethics to uphold the highest standard of such principles like integrity, objectivity, competence, fairness, confidentiality, professionalism and diligence.

FPSB (Financial Planning Standard Board) is the licensing authority of CFP certification in India.


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